1995 (1) TMI 185 - AT - Central Excise

Issues Involved:
1. Correct classification of the product 'Carbon Black' under Chapter Heading 3206.19 or 3801.01 of the Central Excise Tariff, 1985.
2. Applicability of Note (a) to Chapter 38.
3. Consideration of the product as an emulsion or paste.
4. Exclusion of Chapter 32 due to Note 2.
5. Requirement for remand for de novo consideration.

Issue-wise Detailed Analysis:

1. Correct Classification of the Product 'Carbon Black':
The primary issue in this appeal is the correct classification of the product 'Carbon Black'. The Assistant Collector classified the product under Chapter 38, sub-heading 3801.19, as 'miscellaneous products of Chemical or allied industries'. The Collector (Appeals) upheld this classification, emphasizing that Note (a) to Chapter 38 specifically covers "Carbon in the form of paste". The appellant argued that the product should be classified under Chapter Heading 3206.19, as it is based on colouring matter used for colouring textile material and is in aqueous media, which is not excluded by Note 2 to Chapter 32.

2. Applicability of Note (a) to Chapter 38:
The Assistant Collector and the Collector (Appeals) both referenced Note (a) to Chapter 38, which includes "Artificial graphite or other carbon in the form of paste blocks". The appellant contended that their product, being an aqueous dispersion of Carbon Black, does not fall under this category. The Tribunal noted that Chapter 38 is a residual chapter and should only be applied when the product is not classifiable under Chapters 28 to 38.

3. Consideration of the Product as an Emulsion or Paste:
There was a significant discussion on whether the product is an emulsion or a paste. The Assistant Collector described the product as a black viscous liquid, an aqueous dispersion of Carbon Black. The appellant argued that the product is an admixture of Carbon Black with water and other substances, and thus should be considered an emulsion. The Tribunal highlighted the importance of distinguishing between emulsions, true solutions, and suspensions, noting that emulsions are mixtures of immiscible liquids, while suspensions involve solids dispersed in a liquid.

4. Exclusion of Chapter 32 Due to Note 2:
The Collector (Appeals) disagreed with the Assistant Collector's application of Note 2 to Chapter 32, which excludes "pigments dispersed in non-aqueous media in liquid or paste form". The Tribunal agreed that since the product is in aqueous media, it is not excluded from Chapter 32. However, the Tribunal also noted that the lower authorities did not provide sufficient reasons for excluding Chapter 32 and classifying the product under Chapter 38.

5. Requirement for Remand for De Novo Consideration:
The Tribunal concluded that neither the Assistant Collector nor the Collector (Appeals) considered all relevant aspects and the law as it stood at the relevant time. The Tribunal emphasized the need for a chemical test report and a thorough examination of the product's characteristics. Consequently, the Tribunal set aside the impugned orders and remanded the matter to the Assistant Collector for de novo consideration, directing that the appellant be given an opportunity to present evidence and be heard before a final decision is made.

Conclusion:
The Tribunal set aside the orders of the lower authorities and remanded the case to the Assistant Collector for re-examination, emphasizing the need for a detailed consideration of the product's classification under the relevant chapters and notes of the Central Excise Tariff, 1985. The Tribunal highlighted the importance of distinguishing between emulsions and pastes and the necessity of a chemical test report to ascertain the product's characteristics.

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